Jobless total jumps to 1.5 million

Unemployment has risen at its fastest pace in more than 12 years, data showed yesterday, suggesting Britain's long run of falling joblessness may be coming to an end.

The figures also showed that the pace of wage growth fell to its lowest in more than two years in the three months to October, indicating that higher oil prices are not feeding through into wage demands, something that may allow the Bank of England to cut rates next year, economists said.

The Office for National Statistics said unemployment rose 72,000 in the three months to October from the previous three months, the biggest rise since the autumn of 1993 when Britain was emerging from its worst post-war recession. The jobless level is now 1.49 million. That pushed the jobless rate up to 4.9% from 4.7%, also the biggest jump since 1993.

Statisticians said the biggest rise was in the 18-24 age group while unemployment among the over-50s fell during the period. The claimant count measure of unemployment, which only picks up those receiving benefit, rose by 10,500 in November to 902,000, the highest for two years. The claimant count has risen for 10 months in a row, the longest stretch since 1992 and a rise of 88,000 since January.

The number of vacancies fell but the number of people in employment rose to 28.8 million, slightly shy of a record high hit in the autumn and showing that while unemployment may be rising, the labour market remains generally healthy. The claimant count jobless rate, for example, remains at just 2.9%. "The labour market data are clearly softer overall. Most attention will be focused on the fact that claimant count unemployment rose for a 10th month running. [This] threatens to limit the upside for consumer confidence and spending," said Howard Archer, an economist at Global Insight.

There was encouraging news for the Bank of England, which has been worried that the surge in oil prices could feed through into wage inflation. The ONS said average earnings growth slowed sharply in October to 3.6% from 4.1% in September, the weakest since August 2003. Statisticians said the drop was mainly due to some financial sector bonuses last year not being repeated this October. But even when bonuses are stripped out, earnings growth slowed to 3.9%, the lowest since February 2004. "This data shifts the odds significantly towards an interest rate cut fairly early on in 2006, particularly as it follows generally benign consumer and producer price inflation data for November," Mr Archer said.

Jonathan Loynes of Capital Economics said there were no signs of wage inflation and that the figures were "very reassuring". "The Bank is unlikely to relax fully until the January pay round is over. But with RPI inflation - to which most settlements are linked - at a three-year low, we see little cause for concern," he said.

But Robert Barrie, an economist at CSFB, was less convinced than most in the City that the figures showed a weaker economy. He pointed to the rise in employment and the fall in so-called "inactivity" - students, the long-term sick, those looking after family - as evidence that economic activity remained robust. "The number of economically active people is rising really quickly and the evidence shows that many of the jobs are going to older people," he said.